No, if you want to get the budget under control without meaningfully cutting into entitlements, you’re going to need to hike taxes substantially on the middle class. I’m waiting for the first politician to say this out loud.
I’m usually not big on giving the Congressional Progressive Caucus much credit for anything beyond continued respiration and economic stupidity. However, they seem to have been goaded by Congressman Ryan’s attempt to save several trillion dollars from the Federal Budget. They teeter perilously on the brink of showing political courage. They’ve decided to put someone else’s money where their mouths are and have released a modest proposal entitled “The People’s Budget.”
This “People’s Budget” operates under the premise that placing a heavier taxation burden on the rich and on businesses will avoid the necessity of having to reduce major entitlement programs. Phillip Klein describes how the Progressives intend to bankroll the continued Visigoth Holiday of middle class entitlement programs.
To extend the long-term solvency of Social Security, it would propose dramatically increasing payroll taxes on both the employer and employee side, and funneling the money into even more generous benefits. The People’s Budget would rescind last year’s tax deal to raise rates on higher income levels, boost taxes on capital gains and dividends, increase the estate tax, institute three “millionaire tax rates,” with the highest reaching 47 percent, tax corporate foreign income, impose a “financial crisis responsibility fee,” and institute a “financial speculation tax.”
At some point this will bring us to exactly the point where Megan McArdle predicted it would. You cannot fund 60% of the US Federal Government’s expenditures by vampiring our current stock of millionaires. There not as many of these people as there are entitlement recipients.
Millionaires also are famously mobile and capable of avoiding taxation. They form an Aristocracy of Pull and buy themselves a Barack Obama anytime the Progressives go and get uppity. There is simply no way that the United States can pay 45,589,000 program recipients by raising the taxes on 2% of the population that can easily leave or buy political influence at any time they find these tax rates off-putting.
This will ultimately leave the altruists with a choice. They can fund entitlements for the middle class or the poor, but not both. It will not be hard to figure whose children that the Democrats will decide to leave behind. Poor people don’t vote enough and don’t contribute enough to make them a valuable enough part of The Blue Social Model. The Democrats will not be able to continue their care and maintenance out of other people’s wallets if they want to remain electable.
“The People’s Budget” taxes virtually every major source of wealth still being created in Modern America. It can only surpass the collections of the “Simpson-Bowles” tax increases by 1.3%. The rich, as F. Scott Fitzgerald opined, may indeed be different than you and I. However, they just aren’t different enough to fund a liberal fantasy-land budget.
Eventually, even if the Left dominates this contrived government shutdown, they are going to have to drink this truth down straight with no chaser. The endless desire for Middle Class entitlements is not fundable with the current stock of wealthy tax-cattle in the United States of America. At some point the SS Titanic runs out of lifeboats. The People’s Budget runs out of money too soon to actually provide handouts for all of the people.